“Overall Activities of Bangladesh Development Bank Limited”
Chapter – 1
Objective of the study
Methodology of the study
Definitions of Term used in the Study
Limitations of the study
As a development bank, BDBL primarily remains committed to committed to provide industrial financing. It is also to embark on commercial banking activities including foreign exchange and international trade financing.
The bank will continue to strengthen its growth and brand image by expanding new business activities, particularly in the area of Trade FINANCE, Import and Export Business, Foreign Remittance, retail banking, SME and agro-based industries mainly. For major manufacturing, infrastructural and utility project, the bank will prefer syndicated financing. Finally the bank will remain committed to reduce non-performing loans and improve recovery from written-off loans.
In order to support sustainable long-term growth and profitability and for the benefit of all stakeholders, the bank will continue to adhere to good corporate governance practices, sound risk management polices and prudent credit policies and practices. The bank confidently looks forward to greater success in delivering superior shareholders values in 2011.
The bank wants to build a profitable and socially responsible financial institution. It carefully listen to the market and business potentials, It is assisting stakeholders to build a progressive, healthy, democratic and poverty free Bangladesh. It helps make communities and economy of the country stronger and to help people achieve their financial goals.
1.1 Objectives of the Study
The objectives of the proposed study are to find the reasons for loan default practices of BDBL. The following are the objectives of the study:
- To develop a theoretical understanding of overall activities of BDBL.
- To learn about actual practices in Human Resource Management in BDBL.
- To learn the overall function of Bangladesh Development Bank Ltd (BDBL) for the contribution of industrialization of the country
- To know about the consequences of HR practices of BDBL.
- To develop knowledge about the systems approach to human resources management.
- To get an idea about the systems approach to employee selection.
- To acquire knowledge about the process of matching employee qualification with position requirements.
- To know about orientation and socialization process for new employees.
- To analyze special motivational techniques with particular emphasis on the quality of working life and job enrichment.
- The weakness of the Human Resources of BDBL.
- To recommend necessary steps for overcoming such problems of BDBL.
1.2Methodology of the Study:
In this study the descriptive type of research has undertaken to gain insights and understanding about overall operation of Bangladesh Development Bank Ltd. (BDBL) and the loan recovery operation.
Source of Information:
Sources of Primary Data:
- Face to face interview.
- Officials’ records & documents of Bangladesh Development Bank Ltd. (BDBL).
- Communication with other respective personnel of Bangladesh Development Bank Ltd. (BDBL).
The sources of Secondary data are:
- Annual report & appraisal manual of BDBL
- Journals and relevant Books
- Website of BDBL
1.3 Definitions of Term used in the Study
Human Resource Management
Human resource management “as the field of management in involves planning, organizing, directing and controlling the functions of procuring, devoting maintaining and motivating a labor force”.
Human Resource Managementis a part of the organization that is concerned with the “people” dimension. HRM can be viewed in one of two ways. First, HRM is a staff, or support, function in the organization. Second, HRM is a function of every manager’s job.
Promotion is a continuous process by which the employee motivates for better work; get the price for employee’s better work. In BDBL promotion for staff/officer follow service rule along with following report are enclosed for promotions:
The competent authority may terminate the services of a confirmed employee or call upon him/her to resign without assigning any reason, by giving him/her one month notice in writing or on payment of one month substantive pay in lieu of such notice and the employee shall not be entitled to any form of compensation for termination of service. If terminate before 10 years an employee only achieved provident fund benefit no other benefit he/she will achieved
HR and Staffing
Planning is one of the major functions of HR department. HR focuses on the basic issues relating to hiring potential candidates for the organization. At first, HR determines the need for the organization of hiring potential employees.
HR and Training & Development
HR is concerned with the T & D facilities of the personnel. HR department takes all necessary steps to develop the skills and knowledge of the employees so that they can perform their tasks effectively and efficiently.
HR and Motivation
HR performs the task of job analysis, job description, job design, job rotation, wages and salaries, performance appraisal, rewards, benefits, and compensation facilities of the employees.
HR and Maintenance
HRM is directly linked with all the facilities needed to the employees such as -safety & health facilities, making contacts with labor relations, develop good relationships with employees.
Loan may be demand loan or a term loan. Advance made in a lump sum repayment either on fixed installment basis or in lump sum on subsequent debit except by way of interest, incidental charge, etc. is called a loan. After creation of loan there will be only repayment by borrower. The loan may be repaid in installment or at expire of a certain period.
Overdraft is that advance which is allowed on current account operated upon by cheque. The customer may be sanctioned a certain limit within which he can overdraw his current A/C within a certain period
Pledge is the bailment of goods as security for payment of a debt or performance of a promise.
Bailment is the delivery of goods by one person to another for some purpose under a contract.
1.4 Limitations of the Study
This internship report was not easy to prepare. It has taken long time to get all the information properly, the students of Department of AIS, just have completed our formal education stage. After completing the institutional experience, Practical performance in the formal stages become difficult. So in performing this report our lack of proper knowledge greatly influenced in this performance. Besides above, have to face some other limitations are:
· Lack of availability of data
· Improper combination among various departments
· Time is a limitation that would mostly with stands a comprehensive study on the topic selected.
· Up-to-date information were not available
· Don’t give the data from their source document
· Unwilling to give information more because of extra harassment without their responsibility
· Being busy, also another reason of not giving more information
· They are in government employee so have no eagerness to supply more because of extra hardness
Chapter – 2
Overview of Bangladesh Development Bank Ltd.
Number of Branches
Number of Employees
Product/ Service Scheme
SWOT Analysis of the Identification of strengths, weakness, opportunities and threats of the organization
An Overview of the Organization
Bangladesh Development Bank Ltd (BDBL), which was shaped up by a merger between Bangladesh Shilpa Bank and Bangladesh Shilpa Rin Sangstha, will start its full-fledged operations across the country from January 3, 2010.
For long, both the Bangladesh Shilpa Bank and Bangladesh Shilpa Rin Sangstha had been facing crisis in their respective operations as a huge amount of loans disbursed by them remained unrealized. Before the start of the banking operations, a vendor agreement will be signed between the government and the BDBL as a legal compliance, established as a public limited company, took over the undertaking and the business of statutory bodies namely Bangladesh Shilpa Bank (BSB) and Bangladesh Shilpa Rin Sangstha (BSRS) with all their assets, benefits, rights, powers, authorities, privileges, liabilities, personnel, borrowers and other obligation to carry on with the same business. Additionally, it got the mandate to engage in commercial banking. The authorized capital of the new bank is Tk. 1,000 corer, while its paid-up capital is Tk 400 corer.
As a new commercial bank in regards to liability management, the bank will remain focused on raising its core customer deposits by improving its deposit product-mix. In order to enhance its delivery standards, the bank will pursue greater cost efficiency and staff productivity by promoting proactive business practices.
In line with the Government’s and Bangladesh Bank’s policy guideline, BDBL promoting a dynamic SME sector as a priority basis for this regards an SME cell in each branch to advise and assist interested entrepreneurs for setting up Small and Medium Enterprises and also a dedicated desk in each branch for encouraging women entrepreneur for setting up industries.
Bangladesh Development Bank Limited, a development financial institution, provides financial and technical assistance to private and public sector industries, and partnership and proprietorship concerns. It offers long and medium term loans; working capital loans to industrial units; equity support services; and commercial banking services, such as deposit mobilization, foreign business, letter of credit handling, and foreign remittances, as well as issues guarantees on behalf of borrowers for repayment of loans. The company also provides industrial credit programmers’, equity entrepreneurship fund programmers, share trading services, incentive programmers for loan recovery, rehabilitation programmers’, and deposit mobilization programmers for lending and investment.
2.2 Corporate Information
|Name||:||Bangladesh Development Bank, a state-owned commercial Bank (formed through merger of Bangladesh Shilpa Bank & Bangladesh Shilpa Rin Sangstha)|
|Legal Status||:||Public Limited Company|
|Date of incorporation||:||November 16, 2009|
|Banking License obtained||:||November 19, 2009 issued by Bangladesh Bank|
|Vendors’ Agreement Signed||:||December 31, 2009 between the Government and Board of Directors of BDBL nominated by the Government.|
|Formal Inauguration||:||January 03, 2010|
|Registered Office||:||BDBL Bhaban, 8, Rajuk Avenue, Dhaka-1000|
|Authorized Capital||:||Tk.10000 million|
|Paid Up Capital||:||Tk. 4000 million|
|Reserve (As on 01.01.2010)||:||Tk. 2270 million|
|Total Assets (As on 01.01.2010)||Tk. 16747 million|
|Total Human Resource||:||1025|
|Number of Zonal Office||:||4|
|Number of Branch Office||:||19|
|Membership||:||Dhaka Stock Exchange & Chittagong Stock Exchange Ltd.|
BANGLADESH DEVELOPMENT BANK LTD: AT A GLANCE:
(In corer Taka)
|SlNo.||Description||Former BSB & BSRS Position As on December,2009||BDBL’S Position As on December,2010||Increase/Decrease (%)|
|02||Loans & Advances||1027.00||990.60||(4)|
|07||Profit Before Tax & Provision||53.55||82.48||54|
|11||Recovered from Written –Off Loan||20.65||24.64||19|
|12||Balance of Written-off Loan||2437.96||2387.23||(2)|
|13||Balance of Classified Loan||293.20||310.17||6|
|14||Rate of classified Loan||34.25%||38.50%||6|
CAPITAL ADEQUACY OF THE BANK
|Year||Capital Required||Capital Maintained||Excess Capital|
|2010(BDBL) As per Basel-||400.00||1063.25||663.25|
2.3 Organization Structure
2.4 Number of Branches
On January 3, 2010 the bank started with 17 branches, 4 zonal offices and 21 departments in head office. Now in head office number of departments is 27 and number of branches is 19. Bangladesh Development Bank Limited has decided to open 8 new branches in commercially important places of the country for reaching the banking services at the doorstep of the people within 2012 for this purpose bank already submitted necessary documents to Bangladesh Bank for permission. Current year bank open two new branches one in Narayanganj and other in Khatunganj.
2.5 Number of Employees
Bank approved manpower is 1025 which is given in a chart:
|Summary of Manpower|
|Name of post||Head office||Zonal office||Branch office||Total|
|Deputy Managing Director||1||0||0||1|
|Deputy General Manager||18||4||1||23|
|Assistant General Manager||19||0||27||46|
|Senior Principal Officer||32||4||44||80|
|Senior Officer (IT)||16||0||9||25|
|Assistant Officer Grade-1||28||4||20||52|
|Assistant Officer Grade-2||9||0||0||9|
|Assistant Officer Grade-2(Cash)||0||0||11||11|
|Supporting Staff Grade -1||24||0||0||24|
|Supporting Staff Grade-2||43||3||20||66|
|Supporting Sub Staff||54||6||60||120|
2.6 Vision Statement
To emerge as the country’s prime Financial Institution for supporting private sector industrial and other projects of great significance to the country’s economic development. Also be active participant in commercial banking by introducing new lines of product and providing excellent services to the customers.
2.7 Mission statement
· To be competitive with other Banks and Financial Institutions in rendering services.
· To contribute to the country’s socio-economic development by identifying new and profitable areas for investment.
· To mobilize deposit for productive investment.
· To expand branch network in commercially and geographically important places.
· To employ quality human resources and enhance their capability through motivation and right –type of training at home and abroad.
· To delegate maximum authority ensuring proper accountability.
· To maintain continuous improvement and up-gradation in business policies and procedures.
· To adopt and adapt to new technology.
· To maximize profit by strong, efficient and prudent financial performance, and
· To introduce new product lines according to market needs.
2.8 Product/ Service Scheme
The bank is always committed to serve the clients with the best values and innovative products and services to enrich its portfolio looking at the client’s demands and desires.
1. Development Banking
· Industrial Loan with emphasis on syndicated arrangement (power & energy, telecommunication, fiber optic cable, etc)
· Public – Private Partnership (PPP) project(port development, transport & communication like road, water & air ways etc)
· Small and Medium Enterprise (SME like IT industries i.e. development of hardware & software)
· Agro-based venture depending on indigenous raw materials ( like jute twin/yarn industries)
· Green banking ( environment & eco – friendly industries like automatic brick kiln, renewable energy, effluent treatment plant, etc)
· Lease financing
· Real estate business ( including housing loan)
2. Commercial & Foreign Exchange Business
- Current deposit
- Savings deposit
- Short term deposit
- Fixed deposit
- Deposit pensions Scheme
- Other special saving deposit
- School banking (New)
(a) 5-Year term BDBL Sanchay Scheme (BDBLSS)
(b) 10-Year term Shikkha Sanchay Scheme (SSS)
(c) 10-Year term Chikisha Sanchay Scheme (CSS)
Short Terms Loans
- Cash credit(Hypothecation)
- Cash credit (pledge)
- Secured advances(General)
- Retail banking
a) Consumer’s credit
b) Personal loan
· Trade/Foreign trade financing
a. Export cash credit
b. Packing credit
c. Purchase of local & foreign documentary bill
d. Payment against documents (PAD)
e. Loan against imported merchandise (LIM)
f. Loan against trust receipt (LTR)
· Local L/C
· Import L/C
· Export L/C
· Back to Back L/C
· Foreign remittance
· Foreign exchange buy & sale
Other Banking Service
- Demand draft issue
- Payment order issue
- Selling of prize bond
- Selling of saving certificate.
3. Capital market operations
- Share/ Securities trading
- Underwriting of public issue
- Brokerage house services
- Mutual fund operation
- Banker’s to public issues
2.9 Principle Activities
The functions of BDBL HRMD are discussed elaborately in the following sections.
Leave and Medical section
Medical Allowances may be paid in accordance with the job grades and on such conditions that may be prescribed by the Competent Authority from time to time. The policies followed for employee leaves management based on the types of leaves. All are discussed below:
As per service rules an employee can consume every government holiday. Leave facilities provided by BDBL are:
The motive behind for establishing welfare section is to support an employee / officer after retirement or medical support during the job period. One employee must invest 10% of his/her basic salary into welfare fund as name of provident fund. It will calculate:
General Administrative & policy section
We know that the word ‘Administration’ means controlling people. In BDBL, HR Administration is much more than just controlling. It includes motivating the workforce, encouraging them to be more productive and innovative, leading or selecting or providing an appropriate leader for a leaderless team.
Some smaller and simpler day-to-day functions are carried out by the Administration as well. Administration also has to undertake some harsh duties which are Show Cause letter issue, Warning letter issue, issuing letter of Termination, issuing Dismissal order, Audit and Investigation etc. These are certain unavoidable and rare incidents caused mostly by employees and their personal issues that directly violate Bank’s code of conduct.
As per service rules of bank this section make policy and pass them to higher authority to approved it. This department also made structure of the bank and structure of different department of this bank. It also denoted working area of GM (General Manager), delegation of financial power, delegation of business power, delegation of administrative power.
- Make service rules of the bank
- Provided information about bank position to national assembly
- Made worksheet about assistance
- Provided information to auditor, Bangladesh Bank and business delegate
- Make administrative budget
- Judge the decision which was take in branch conference
- Made work plan about branch conference
- Working about banking diploma
- Collecting information about deposit position of the bank
- Collects information about employee work position (Employee repotting time in office)
- Judge the work position of LAN & WAN
- Send statements relating to delegation of power
This section follow-up bank guideline, if any employee/officer plays any role against BDBL or banking rules or government service rules an inquiry committee will be formed according to bank law. Committee will collect information about crime and if the crime proves undoubtedly, the board of directors will punish him/her according his/her level of crime. The punishment will be
- Held up promotion
- Held up increment
- Suspension from service (during suspension period an employee only pay 50% of his/her basic salary, no other benefit he/she earned
- Dismissal from service
Management officer section and Management staff section
This department is divided two separate section one works for officer (management officer section) other works for staff of the bank that is (management staff section). Bothe section do same jobs but under separate section. Management officer section posting, transfer, increment, promotion officer and management staff section posting, transfer, increment, promotion staff.
2.10 SWOT analysis of BDBL
SWOT analysis is a process to identify where we are strong and where we are vulnerable, where we should defend and where we should attack. It tells us our strengths, our weaknesses, the opportunities which prevail in the market and the threats which we may face from our competitors and other from other potential factors.
2.10.1 Identification of strengths, weakness, opportunities and threats of the organization
- Superior Quality: provides its customers excellent and consistent quality in every service. It is of priority that customer is totally satisfied.
- Dynamism: Bangladesh Development Bank Limited draws its strength from the adaptability and dynamism it possesses. It has quickly adapted to world class standard in terms of banking services. It has also adapted state of the art technology to connect with the world for better communication to integrate facilities.
- Efficient Management: All the levels of the management of Bangladesh Development Bank Limited are solely directed to maintain a culture for the betterment of the quality of the service and development of a corporate brand image in the market through organization wide team approach and open communication system.
- Experts: The key contributing factor behind the success of Bangladesh Development Bank Limited is its employees, who are highly trained and most competent in their own field .Its provides their employees training both in-house and out side job.
- History: Bangladesh Development Bank Limited has a good reputation. It has a loyalty of customers and vendors.
- Limited Workforce: Bangladesh Development Bank Limited has limited human resources compared to its financial activities. As a result many of the employees are burdened with extra workloads and work late hours without any overtime facilities. This might cause high employee turnover that will prove to be too costly to avoid.
- Poor Technology Infrastructure: As previously mentioned, the world is advancing e-technology very rapidly. Though Bangladesh Development Bank Limited has taken effort to join the stream of information technology, it is not possible to complete the mission due to the poor technological infrastructure of the country.
- Limited Branch: It has limited branch in Bangladesh.
- Government Support: Government of Bangladesh has rendered its full support to the banking sector for a sound financial status of the country, as it has become one of the vital sources of employment in the country now. Such government concern will facilitate and support the long-term vision of Bangladesh Development Bank Limited.
- Evolution of E-Banking: Emergence of e-banking will open more scope for the Bank to reach the clients not only in Bangladesh but also in the global banking arena. Although the bank has already entered the world of e-banking but yet to provide full electronic banking facilities to its customer.
- Information Technology: Banking and information technology might give the bank leverage to its competitors. Nevertheless there are ample opportunities for Bangladesh Development Bank Limited to go for product innovation in line with the modern day need.
- Increase ATM Booth: Bangladesh Development Bank Limited increases ATM Booth facility.
- Mergers and Acquisition: The worldwide trend of merging and acquisition in financial institutions is causing concentration. The industry and competitors are increasing in power in their respective areas.
- Frequent Currency Devaluation:
Frequent devaluation of Taka and exchange rate fluctuations and particularly South-East Asian currency crisis adversely affects the business globally.
- Emergence of Competitors:
Due to high customer demand, more and more financial institutions are being introduced in the country. Many banks are entering the market with new and lucrative products.
As consider industrial band BDBL intends to set standards as the market leader in Bangladesh. It demonstrates that a locally owned institution can provide efficient, friendly and modern banking service on a profitable basis. Human Resource Management Department is the most confidential department for any organization as well as Human Resources Management in BDBL. Here as an intern, limited information was collected for preparing this report because of too much confidentiality.
It was an honor to work as an intern in a reputed organization like BDBL. The BDBL is a bank that confirms the best service to the customers as well as to the employees by Human Resource Division. BDBL is the fastest growing Bank in Bangladesh. By working in HRM Division the knowledge was learnt would be helpful enough to sustain with the real organizational environment. Through BDBL is government supported organization it has strong capital adequacy and after merger now BDBL operate business fairly well. BDBL corporate social responsibility (CSR) based on ethical values following by people, planet, and the profit are in compliance with legal and regulatory requirements which encompass employees, customers, business associates, shareholders, suppliers, regulatory authorities and the community at large. BDBL main intention is to rapid industrialization as such bank always try to invest productive sectors rather than commercial banking system.
2.10.2 Action plan
- Bangladesh Development Bank Limited should increase workforce;
- Bangladesh Development Bank Limited should improve technology infrastructure;
- Bangladesh Development Bank Limited should improve skilled manpower;
- Bangladesh Development Bank Limited should improve card division
- Bangladesh Development Bank Limited should increase ATM Booth
- Bangladesh Development Bank Limited should increase job security
Chapter – 3
Operational Activities of the Bank
Loan operations department (LOD)
Documentation and Machinery Department
Project Implementation Department
Central Recovery Department
Central Accounts Department (CAD)
Project Rehabilitation Departmt
Human Resources Management Department (HRM)
OPERATION OF DHAKA COMMERCIAL BRANCH OFFICE
3.1 LOAN OPERATION DEPARTMENT:
Bangladesh Development Bank grants loan on the basis of certain criteria .The loan operation department does the first activities of loan granting .Any entrepreneur who wants to borrow money from BDBL must fulfill at first bank standard questionnaire form in terms of tk. 1000 . These processes are as follows:
- At first an application form is supply to the entrepreneur.
- After filling up the application from it is submitted by the entrepreneur.
- The entrepreneur supplies a project appraisal letter .
- After analyzing the project appraisal, the board decides the loan should be sanctioned or not .
- If the loan is sanctioned it is forwarded to the project implementation department.
- To provide suggestion to the entrepreneur for investment in industry in industry sector .
- Examine project loan proposal and present to the committee for sanction .
- Processing co financing project and takes action for authorizing.
- Appraisal report is evaluated on basis of up dated information.
- Analyze the investment principle time to time .
- To provide suggestion for fulfilling loan application form to NRB .
Overview of Loan Operation Department
|Start with BSQF|
|Submission of BSQF proposed project|
|Evaluation of proposed project|
|Put up appraisal report|
|Ends of this department|
|Passed process to other department|
The project approval letter will includes the following :
I. Name of the project.
III. Types of product.
V. Historical data and information of a project.
The project appraisal includes different types of aspect the basis of which loan is granted these are:
- Management And Organizational Aspect :
Appraisal of management is very important part of project appraisal .The successful implementation and running of the project rests primarily , on the resourcefulness , competence and integrity of its management .There are not sets of rules to find out if the borrowers’ are persons of integrity .It is done by direct and indirect investigation .The borrowers’ experience and capabilities can be assessed by his educational background ., business experience , general reputation and above all , his /her receptiveness to new ideas and potentially to lean new things . Closely related to the management is the type of organization structure necessary to carry out and operate the project successfully.
Appraisal of management and organization of a project can not be done adequately without undertaking credit investigation. The credit worthiness of the sponsors is assessed , among others by way of obtaining credit reports from the various banks and financial institutions .
After preparation of the draft project appraisal report and its approval by the appropriate authority of the financial institution, it is placed before the BDBL loan committee for consideration . After clearance by the loan committee , a memorandum on the project for sanctioning loan is prepared and placed for approval by the competent authority .After loan is sanctioned , a pre- sanction letter is issued to the sponsors and the required project deposit issue formal sanction letter on receipt of the acceptance of pre sanction terms and condition .
· Name of organization.
· Classification .
· Name of the sponsor.
· Corporate set up.
· Historical background of the sponsors such as credit .
- Technical Aspect
Technical appraisal report is prepared by an engineer of the appraisal section to see whether the project is sound with regard to every engineering and technological consideration , including product specification , product process , size internal balance , suitability and availability of physical facilities ,design and layout of equipment and building etc. The BDBL has to ensure that the project is soundly designed and appropriately engineered . More concretely , technical appraisal is concerns with question of physical scale , layout and location of facilities ;the technology to used , including types of equipment or processes ; the appropriateness to local condition of technical standard adopted ; the approach to be followed for the provision of services ; the realism of the implementation schedule ; and the likelihood of the achieving the expected levels of output .
A critical part of technical appraisal is a review of the cost estimated and engineering and other data , which they are based to determine whether they are accurate with an acceptable margin . The technical appraisal is also concerned with estimating the costs of operating project facilities and services and with the availability of necessary raw material and other output . The potential impact of the project on the human and physical environment is also examined , to make sure that any adverse effects can be controlled or minimized .
The ultimate aim of project appraisal is to determine the profitability of the project both from commercial and social point of view. This can not be undertaken unless a thorough a technical study and cost analysis is made and related technical problem solved . Thus the technical study and cost analysis provide the basis both for the initial estimated of the profitability of an investment during the initial stage and also for the final decision to implement the project . The technical appraisal, therefore, constitute the foundation of the entire structure of project appraisal.
The basic aspects of technical appraisal are:
· Preliminary investigation of products /services, various inputs such as raw materials, technology required etc.
· Selection of product process involving the choice of alternatives, wastage , by product , disposal of waste and effluents etc.
· Machinery and equipment for products and services .
· Production capacity and efficiency.
· Layout plan for building and machinery.
· Analysis and evaluation of various utilities and services .
· Work schedule.
· Estimation and evaluation of cost .
· Types of plants.
· Production mix and capacity.
· Technology and manufacturing process.
· Raw material and other related element.
- Marketing Aspect :
Detail market appraisal report is prepared by the project economists to determine the size of the market, and ascertain the supply gap on the hand and to analyze the marketability of the products and services on the other. An industrial projects is expected to bring in some goods and services for the community. But the community may not need them infinitely . Their demand may be finite but at the given price . The objective of the market study is to see how much of the foods and services the community is supposed to acquire and at what price . In other words , the market analysis is concerned with the study of the demand for a project’s output .
The demand for products and services changes over time as a function of price , income and other variable . It is thus necessary to estimate how much the project cak sell in the short and long run taking these variables into consideration. Generally the actual consumption or the effective demand for an output in physical quantities is determined taking into consideration . Production, imports , exports and changes in stock position . In absence of adequate information, apparent consumption method is used as an approximation to true consumption .
The future demand for goods and services of an industrial projects is determined on the basis of trend extrapolation . In a large number of cases , data relation to past levels of consumption , income and prices are not available .In such cases, the trend method is used for projecting future demand . This is done by way of establishing a median line between the quantities consumed over a number of years and estimating the future demand in accordance with the trend of this line .
Intermediate goods are the facilitate production of final consumer goods .Therfore the demand for the intermediate goods is linked with the activities in the using sector . For example , the demand for yarn will large depend on the prospect of development in the weaving sector .
The demand for capital goods is estimated based on the rate and volume of investment in the using industry , durability of capital goods , technological innovation etc. In the demand projection of import substituting goods , the level of imports is taken as the indicator .
§ Daily and annual demand .
§ Cost competition .
§ Government incentives .
§ Global market .
§ Importing countries .
§ Marketing strategy .
§ Quality .
§ Pricing .
§ Opportunity and threat .
- Financial Aspects :
The next step is to prepare a detailed report on the financial viability of the project. The main purpose of such appraisal is to asses the viability of the project in terms of its operation in the future years and its financial soundness . It is concerned with assessing the feasibility of a project from the point of view of its financial result . The project direct costs and benefits be calculated in pecuniary terms at the prevailing market prices . The BDBL has to satisfy itself not only about the current solvency of the projects but also about its continued solvency during the currency of the loan to ensure timely payment of the principle , regular payment of interest and adequacy of physical assets representing security for the loan . The relevant information collected on technical , economical and management aspect of the projects have got direct bearing upon the financial appraisal . Such appraisal is directed to examine mainly the following aspects :
- Financial requirement to bring the projects into existence and the probable sources of finance .
- Prospect of adequate revenue generation with particular emphasis on actual cash generation (liquidity ) and probable impact on the financial condition (solvency ).
The first aspect deals with total cost of the projects (fixed cost and net working capital )and a suitable financial arrangement .The second aspect related to the analysis of production , cost , income etc. at different volumes of production at different levels of activity . BDBL focus of attention is on the earning of the projects . Earning should be sufficient so as to enable the projects to services its debt (installment and interest ).There are various approaches for financial appraisal of which the following techniques are being used by the BDBL.
1. Ratio Analysis: a) Liquidity ratios:
i. Current ratio
ii. Quick ratio
iii. Working capital ratio
I) Debt –equity ratio .
ii)Debt service ratio
c). Activity ratios:
i)Inventory turn over ratio
ii)Asset turn over ratio
iii)Accounts receivable ratio
d). Profitability ratios:
i)Return on sales
ii)Return on equity
iii)Return on capital employed
2.Break -even analysis ;
4.Fund flow statement ;
5.Internal rate of return (IRR);
6.Pay back period method ;
7.Net present value method (NPV);
E. Economic aspect :
Economic analysis eliminates the divergence between social and private by valuing all goods and services in terms of the real costs and benefits. Which their production imposes on the economy . The economic analysis of a projects begins with the appropriate valuation of all inputs and outputs . The local currency is used as numerate and the foreign exchange is converted into local currency at the official exchange rate .
Treatment of inflation is always a peculiar problem in the field of project appraisal .This problem is handled by way of considering a contingency margin depending on the current rate of inflation .As regards the fluctuation of exchange rates, BDBL has introduced a self finance insurance scheme known as the “the exchange rate fluctuation absorption scheme (EFAS-1990)’’Under the scheme , the borrowers of foreign currency are being protected from the adverse fluctuation of exchange rates on payment of the required exchange premium by way of converting foreign currency loans disbursed at rates prevailing on the date of disbursement . Both internal rate of return (IRR) is calculated regarding the project under this aspect .
Economic appraisal is prepared by the project economic justification for setting up of the project .The project is looked from the national or social point of angle the economic cash flow is constructed on the basis of “true or real prices ”commonly known as accounting or shadow price , when considered in project evaluation , reveal more accurately the social costs and benefits to a country than if it are based on market prices , which are frequently distorted . When the gap between shadow prices and actual prices become too large , prices appear to be far from reality and thus the viability of the project is an affected .
- Sensibility Analysis :
3.2 DOCUMENTATION AND MACHINERY PROCUREMENT DEPARTMENT:
After sanctioning loan by loan operation department , it issues a letter to documentation department , parties and after concerned department . The documentation department issues a letter to the parties to produce necessary documents . Those documents are:
01. Memorandum of association ,Articles of association .
02. The land upon which the project will be established , document of this land must be produced .
03. Receipt of land .
04. Documentation fee.
05. Mouja map .
06. The document that reveal that the land were not sold within preceding two years . Then a form is filled up . These document are sent to lawyer. It everything is ok it is transferred to project implementation department .
In the documentation process the borrowers are required to submit a copy of memorandum of association and articles of association . It is returned after the confirmation that it has been submitted according to the rules the borrower company must submit it after the authorization by direction of registration of joint stock company and firm .The following activities are performed during the time of documentation process .
1. The borrower company must submit the necessary document:
After the sanction of loan documentation and machinery department adviser the borrower to submit the following documents along with the document of land and additional necessary :
· In applicable case CS, RS ,DCR, receipt of rent ,certificate of liability , possession certificate ,gazette notification ,transfer certificate , receipt of purchase .
· Memorandum of deposit to titles deeds.
· Agreement of hypothecation .
· Company regulation and regarding .
· Signature of directors .
· Firm signed by the shareholders or directors .
· Memorandum of association and articles of association .
· 100% share certificate .
· Auditors certificate about paid up capital .
· Attested photographs of the directors .
02. Verification of documents by documentation and machinery department and law department :
Machinery procurement department inspect these documents and take necessary steps from law consultant to protect the interest of the bank.
03. Preparation of all documents of the borrower company director :
If documentation and machinery procurement department finds no default on the documents provided by the borrow, the documentation advises the borrower to prepare the following documents:
· D.P note .
· D.P note delivery letter .
· Revival letter form .
· Credit agreement .
· Personal security .
· Memorandum of deposit title deeds .
· Agreement of mortgage .
· Sample signature card .
After receiving the above documents , documentation and machinery procurement department performs the following activities :
· To make list of machinery of enlisting with tender .
· To offer tender for collecting machinery .
· Examine documents and other papers related to tender .
· Comparative price analysis for collecting machinery .
· Provide opinion on technical comment of appraisal by LOD/divisional branch office .
· Then it sends these documents to audit department .After receiving the clearance certificate from audit department that documents are sent to project implementation department and project rehabilitation department .
04. Registration of first charge of bank on project properties :
After the audit clearance from the audit department , documentation and machinery procurement department takes attempt to mark first surcharge on the fixed and current assets .In case of project loan equitable mortgage is authorized instead of registered mortgage ,equitable mortgage is created when original title deeds are submitted along with memorandum of deposit of title deeds. According to the company act of 1994 the above two instruments are required to summit in the office of directorate of joint stock company .
3.3 PROJECT IMPLEMENTATION DEPARTMENT :
When the loan operation department it is forwarded to project sanctions the loan implementation department (PID) performs the following activities :
01. Undertaking necessary initiative after granting loan in favor of the project.
02. Taking necessary action to make the factory layout.
03. Making necessary adjustment in case of change of the project place , change of board of directors and change product mix etc.
04. Making necessary attempt to give the loan a stage by stage after the loan granting .
05. To ensure that necessary capital has been supplied by the entrepreneur and to ensure its proper utilization.